Tech, e-commerce firms may occupy up to a quarter of office space in South-east Asia by 2030

As growth in South-east Asia’s online economy gains pace, investment management company JLL projects that technology companies will drive office occupancy, potentially accounting for 15 to 25% of annual gross office leasing volumes in the next decade, compared to about five to 10% three years ago.

Technology companies have become a key office occupier group in the region and they are frequently the earliest tenants to pre-commit to newly constructed buildings, according to JLL’s report Technology firms transform Southeast Asia.

“Given that technology firms will become a key source of office occupancy, this is an opportunity for real estate investors and developers to create space that will meet this need,” said Regina Lim, head of Capital Market South-east Asia Research, JLL. “Last year, the tech sector attracted over US$6 billion in funding and the industry’s growth will contribute significantly to future office leasing volume, which we estimate will rise at 6% annually amid a GDP growth rate of around 5%.”

South-east Asia’s internet economy could be worth more than US$200 billion by 2025, with e-commerce seen as the fastest-growing segment. Along with an expanding middle class in the region, this segment is predicted to rise at 30% in the next five to 10 years to reach US$88 billion by 2025, based on a Google-Temasek study.

As internet companies developed their presence rapidly in the region in the last decade, e-commerce firms in particular have flourished in the past two years, JLL said. The biggest global technology companies, including Alibaba, Facebook, Google and Sea, currently each occupy a total of 20,000 sqm to 50,000 sqm spread across three to five cities. Many of these companies have increased their headcount by 30 to 50% annually over the last five to 10 years, the JLL report documented.

Separately, co-working and flexible workspace operators have also contributed to the region’s office demand. Flexible workspaces have climbed by an estimated 40% annually in the last three years and now take up 2% of office stock in the region, compared with 0.5 to 1% in 2015.

“We think in the next decade, e-commerce companies will continue to grow, together with flexible workspace and co-working operators,” said Lim. “As e-commerce firms spread their footprint, we predict that gaming and e-sports platforms may become the next driver of office occupancy in South-east Asia.”

According to JLL, the acceleration in office take-up by technology firms in the last three years has occurred mainly in Jakarta, Bangkok, Manila and Ho Chi Minh City. Lim explained that the sustained growth of these companies has been driven by strong socio-economic trends.

By Muneerah Bee